The Impact of Foreign Remittances on Poverty Alleviation: Global Evidence

THE IMPACT OF FOREIGN REMITTANCES ON POVERTY ALLEVIATION: GLOBAL EVIDENCE

Muhammad Haseeb

Universiti Utara Malaysia, Sintok, Kedah, Malaysia,

shamzaeffa@uum.edu.my

Shamzaeffa Samsudin

Universiti Utara Malaysia, Sintok, Kedah, Malaysia,

scholar_economist@yahoo.co.uk

Abstract.This study using an empirical analysis to examine the impact of foreign remittances along with some other variables (foreign aid, debt, human capital, inflation and income) on poverty alleviation in 39 countries including the lower middle, upper middle and high income countries. The study uses the data covering the period of 1990-2014 and the method of Panel fully modified OLS (FMOLS). The FMOLS estimates reveal that increase in income leads to decrease in poverty. Foreign remittances are found to have positive impact on poverty alleviation and statistically significant only for upper middle income countries. The impacts of aid and debt on poverty are found to be positive, indicating both factors contribute positively to poverty expansion. In the same vein, the results exhibit no visible evidence that foreign aid has an effective apparatus for the poverty mitigation. Thus, policy-makers need to devise an appropriate policy to rationalize dependency on foreign aid and mitigate poverty largely by encouraging remittances inflows.